Bailout is dead. Stocks got killed. Safer investment rallied.

And here’s the chat around town …

• Andy Policano, dean of UC Irvine’s Merage School of Business: “Basically, we have two problems: A lack of liquidity and a lack of confidence. The plan that was before Congress was very expensive and it is not clear it was the right thing to do. Some things that can be done are: Get the FDIC to insure accounts up to $1 million — from the current $100,000 — to protect companies that are depositors and get companies to pay for that insurance to keep the bill away from taxpayers. Also, the government should do more to help homeowners facing foreclosure. The main thing is we’ve got to do something to restore confidence in the markets.”
• Kurt Eggert, professor of law at Chapman University and member of Federal Reserve Consumer Advisory Council 2004-07: “The bailout would have done too little, too late to adress the underlying problem: the rise in defaults and foreclosures. There’s some talk in the bailout plan, but it’s mostly lip service, about addressing loan modification. I think we have to fix the underlying problem first and then deal with the Wall Street financial crisis next. That will be tough to do, because you can’t always tell who owns the loans that are securitized, which is the majority of subprime loans.”
• Anil Puri, dean of the Mihaylo School of Business at Cal State Fullerton: “This is unprecedented. I think there’s an artificial separation between Main Street and Wall Street. I think Wall Street provides support for Main Street to have jobs and keep the economy functioning. If there’s no help, financial institutions will continue to go under and when companies go under, equity is wiped out. These days, everyone has money in the stock market. I think the current bailout proposal is responsible and something like it will be passed.”
• Money manager Ryan Kelly, Spectrum Asset Management: “When there are four houses burning on your street, it is more important to put out the fire than argue about who gets to pay for, profit from and supervise the rebuilding of the four houses. We are in the middle of a very rough period in financial markets, and the Stabilization Plan would assist to restore much needed liquidity and confidence to the system. Now is not a time for debate, but rather a time for action. The shortsightedness by the House Republicans is absolutely shocking.”
• Money manager Chip Hanlon, Delta Global Advisors: “I’m thrilled. Politically, Republicans will probably take the hit because Democrats will claim that the GOP let the economy go off the cliff. History will judge the GOP opposition very kindly, though, as this bailout plan would have made our current financial woes much worse in the long run while making our lives less free. Keep in mind, Democrats could still pass this thing on their own if they wanted to.”
• Real estate consultant Marc Berger at XRoads Solutions: “The government needs to focus on keeping the value of the housing stock from deteriorating any more. Higher home prices will directly translate to a higher value of all the mortgage backed securities and less of a loss that needs to be absorbed. What do I think we need to do now? I would initiate a “Foreclosure Freeze” to put a hold on dumping more distressed homes on the market for a period of 120 days. I would force the lending institutions to mark to market the value of their home loans and then rewrite the loans on a “Shared Appreciation Basis” with the homeowners. While the bailout plan was focused on the liquidity side of the equation I am convinced that the market forces will react to fill that need when the underlying business reason for a loan makes sense.”

Your thoughts on Congress’ “Nay!” vote on the bailout …

Other Monday bailout news …

• Fed makes billions available to battle crisis
• Fannie, Freddie disclose subpoenas, investigations
• Oil sinks below $100 as US bailout plan voted down
• Consumer spending weakens as stimulus fades
• O.C. Realtors say bailout key to restoring housing market

What O.C. house delegation was thinking before the vote …

• O.C. Rep. Gary Miller: Said he had to vote yes
• O.C. Rep. Loretta Sanchez: Hers is a no vote
• OC. Rep John Campbell: Uges his colleagues to vote yes this morning
• O.C. Rep. Dana Rohrabacher: Still doesn’t like this deal
• O.C. Rep. Ken Calvert: This will be a tough vote
• O.C. Rep. John Campbell: OK with deal; outlines next steps
• O.C. Rep. Ed Royce: Still uneasy about bailout terms

Another day, another bank bailout …

• Citigroup buying Wachovia banking operations
• Wachovia in O.C.? HERE.
• FDIC: “Seamless continuity of service … full protection for all deposits.” There will be no interruption in services and bank customers should expect business as usual.” MORE.
• The Associated Press’s take? HERE.
• Don’t feel so bad. We’re not alone! European banks bailed out as crisis spreads!

Posted in: O.C. business news |

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